A North Carolina agency's report says nearly $400,000 was misappropriated from a program designed to improve housing in poor communities.

The state Commerce Department on Tuesday issued a report saying that a Lexington man working for Hobbs, Upchurch, and Associates to administer Community Development Block Grant money submitted bills from a side company he owned for lead paint abatement and other work.

The report by the state Office of State Budget and Management says the company owned by Michael Walser was not qualified to do the work.

Messages left at Walser's company and Hobbs, Upchurch were not returned. A Commerce Department spokeswoman said the agency asked OSBM to audit block grant spending in about two dozen central North Carolina communities in late 2012, before Gov. Pat McCrory took office.